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Buying a home
Posted on 6/26/25 at 2:58 pm
Posted on 6/26/25 at 2:58 pm
How do financial institutions determine how much to lend you to buy a home?
9
Posted on 6/26/25 at 3:01 pm to tigger4ever
Free cash flow vs debt obligations. You’re going to have to give them everything.
Posted on 6/26/25 at 3:06 pm to tigger4ever
Posted on 6/26/25 at 3:13 pm to STLhog
Debt to income and credit rating are primary factors but you can also qualify based on other assets. Of course, it also has to appraise for enough to warrant them loaning you the $ w house as collateral. This seems like something you'd Google and/or ask AI first. Do you have a specific ? or circumstance?
Posted on 6/26/25 at 3:36 pm to TorchtheFlyingTiger
They're going to tell you that you can afford about 1.5-2.0x what you really can afford
Posted on 6/26/25 at 3:41 pm to TorchtheFlyingTiger
When wife and I were looking they prequalified us for a million dollar home. We said no t(a ks and bought a 200k home. Now our mortgage/insurance/taxes is 15% of our take home. If I were you I would figure what what is 25% of my income and then figure out the mortgage/insurance/taxes that would be that value or less and set that as my limit. I never wanted to be house poor and now my house is worth 600k so it’s worth what the jone’s wanted me to pay anyways
Posted on 6/26/25 at 3:52 pm to tigger4ever
Do your kids play travel ball? Yes or No
Posted on 6/26/25 at 4:15 pm to Texas Tea 123
quote:
They're going to tell you that you can afford about 1.5-2.0x what you really can afford
I went to my bank in 2006 or 2007 to get pre-approved for a loan to look at buying my first home. They looked at my income and the guy said, I can easily approve you for this amount today. It was about double I could afford at the time which wasn’t a lot.
I said, “are you crazy?!” He looked at me and said, well we can play with the numbers and probably get you approved for more if you need. I again said, “are you crazy?! You see my income. I wouldn’t be able to make two payments without going bankrupt. How are you staying in business approving loans like this?!”
Needless to say, a year later we saw what happened because of people taking those loans.
Posted on 6/26/25 at 4:17 pm to tigerbacon
quote:this is good advice...if you and the wife have steady jobs and a real expectation of your income rising in the future, then you can factor that in...
If I were you I would figure what what is 25% of my income and then figure out the mortgage/insurance/taxes that would be that value or less and set that as my limit.
Of course, if you have a bunch of credit card debt or a car loan, or any other non-mortgage debt, that will throw off your calculations...
This post was edited on 6/26/25 at 5:56 pm
Posted on 6/26/25 at 4:22 pm to tigger4ever
debt to income (DTI) ratio, credit score(s), and how much you have for downpayment are the main high level factors.
You have to provide everything (paystubs, bank/asset statements, full credit report run (unfreeze all 3 credit bureaus if you have your credit frozen), then the details can matter too. Source of income, source of down payment funds, etc. Depending on those variables, you may have to provide additional documents.
If you had any large deposits into any of your accounts that aren't from your employer within the last 2 full monthly statements, they'll want to know the source and want those statements too, showing those exact amount leaving the source account(s). Everything is sourced and documents required.
Everything has to be verified.
ETA: Regular bills like cell phone, cable/tv, utilities aren't factored into your monthly DTI ratio unless they've been submitted to a collections firm for late payments. All revolving debt (credit cards) and loans (mortgage/car/student/personal) do count towards your monthly DTI ratio.
You have to provide everything (paystubs, bank/asset statements, full credit report run (unfreeze all 3 credit bureaus if you have your credit frozen), then the details can matter too. Source of income, source of down payment funds, etc. Depending on those variables, you may have to provide additional documents.
If you had any large deposits into any of your accounts that aren't from your employer within the last 2 full monthly statements, they'll want to know the source and want those statements too, showing those exact amount leaving the source account(s). Everything is sourced and documents required.
Everything has to be verified.
ETA: Regular bills like cell phone, cable/tv, utilities aren't factored into your monthly DTI ratio unless they've been submitted to a collections firm for late payments. All revolving debt (credit cards) and loans (mortgage/car/student/personal) do count towards your monthly DTI ratio.
This post was edited on 6/26/25 at 4:26 pm
Posted on 6/26/25 at 4:30 pm to tigger4ever
Mortgage no more than 2x your gross income
Posted on 6/26/25 at 5:52 pm to Chicken
Very true about credit card debt. My sister and bro in law mortgage alone is 40% and it’s freaks me out. And now they both are mad because they are house poor and can’t go on vacations.
Posted on 6/26/25 at 6:53 pm to GEAUXT
quote:
Mortgage no more than 2x your gross income
We try to stay less than 1.5 and has worked out well for us. Now this is the mortgage not the price we paid for the house.
Posted on 6/27/25 at 8:16 am to tigger4ever
quote:
How do financial institutions determine how much to lend you to buy a home?
What you can actually afford and increase it by 75%
Posted on 6/27/25 at 8:37 am to tigger4ever
Real answer: Go ask ChatGPT...it will educate you quickly with even basic prompts like this.
Posted on 6/27/25 at 8:41 am to Rize
quote:
We try to stay less than 1.5 and has worked out well for us. Now this is the mortgage not the price we paid for the house.
Most people don’t realize how much it cost to keep up a house. Maintenance, repairs, painting, lawn, roof, appliances, etc. etc. etc.
I’ve spent almost as much money on things like improving drainage, a home generator, new roof, etc. over the last year than I did buying my first home.
And I’m now saving up to replace my A/C in the next year or two. Posted on 6/27/25 at 8:46 am to tigerbacon
quote:
I never wanted to be house poor and now my house is worth 600k so it’s worth what the jone’s wanted me to pay anyways
Treat your home as an investment. Buy in a desirable location. Make wise decisions on home improvements that add value to your home. This is your first home, but likely not your last. You will have to sell it at one point.
It's okay to be house poor for a while - most of us have been there. Your income should go up and your mortgage payment stays steady, so it's a temporary situation.
Posted on 6/27/25 at 8:51 am to Jax-Tiger
Horrible advice to be house poor. Why? So if anything happens you have no money and end out on the street? By the best neighborhood you can afford ideally the cheapest house in that neighborhood but never be house poor. Your quality of life for years would be negatively affected
Posted on 6/27/25 at 9:07 am to tigerbacon
quote:
Horrible advice to be house poor.
It is also bad advice to buy a rundown house in a shitty neighborhood that you might have trouble selling.
Traditionally, when someone says they are "house poor" it means that they have adjusted their lifestyle because they have more expenses and renovations to do to their house and need to set aside more money for those expenses, and that is okay. It means eating out less, and forgoing expensive vacations for a while.
I do not mean that you take on more debt than you can afford, and to go into bankruptcy. That would not be wise, and that is not what most people mean when they say, "I'm house poor.".
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